Correlation Between Brinks and Huron Consulting

Can any of the company-specific risk be diversified away by investing in both Brinks and Huron Consulting at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Brinks and Huron Consulting into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brinks Company and Huron Consulting Group, you can compare the effects of market volatilities on Brinks and Huron Consulting and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Brinks with a short position of Huron Consulting. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brinks and Huron Consulting.

Diversification Opportunities for Brinks and Huron Consulting

-0.64

Correlation Coefficient

Brinks  Huron Consulting

Excellent diversification

The 3 months correlation between Brinks and Huron is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Brinks Company and Huron Consulting Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huron Consulting and Brinks is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Brinks Company are associated (or correlated) with Huron Consulting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huron Consulting has no effect on the direction of Brinks i.e., Brinks and Huron Consulting go up and down completely randomly.

Pair Corralation between Brinks and Huron Consulting

Considering the 90-day investment horizon Brinks Company is expected to under-perform the Huron Consulting. But the stock apears to be less risky and, when comparing its historical volatility, Brinks Company is 1.62 times less risky than Huron Consulting. The stock trades about -0.03 of its potential returns per unit of risk. The Huron Consulting Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  12,295  in Huron Consulting Group on December 27, 2024 and sell it today you would earn a total of  1,976  from holding Huron Consulting Group or generate 16.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Brinks Company  vs.  Huron Consulting Group

Brinks Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brinks Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Brinks is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Huron Consulting

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Huron Consulting Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Huron Consulting displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brinks and Huron Consulting

The main advantage of trading using opposite Brinks and Huron Consulting positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brinks position performs unexpectedly, Huron Consulting can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Huron Consulting will offset losses from the drop in Huron Consulting's long position.

The idea behind Brinks Company and Huron Consulting Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.